 The number one rule in investing is know the risks of the investment, not the rewards. First assess what can go wrong and then look at what can be positive. 99% of the investors first look at the returns, the potential, how much can Facebook grow, how much can Amazon grow, what will happen if this nano chip is applied to these mobile phones, what happens that. So everybody is focused on the reward, especially in a bull market that's eight years long. However real investors, they focus on the risk, what can go wrong, what can go wrong, how much can I lose and when they know how much they can lose, then they go and compare with what can happen positively and then they assess the risk and the reward. It's all about risk reward in investing. That's the top rule in investing. And what you want to find is positive asymmetrical risk reward situations. In this video I'll explain what a positive asymmetrical risk reward situation is. Let's start immediately with a chart. This is a positive asymmetrical risk reward situation. So you can lose maximum ten dollars if you invest in a stock that's priced 100, but the potential upside is 180. So the potential win is 80 dollars, the loss is 10 dollars. A negative asymmetrical risk reward situation is one where you can lose more than what the potential positive reward is. So in this case investment of 100, maximum loss is 60, potential increase is 46. You want to be invested in the first case, so this case where the loss is minimum and the upside is maximum. So it's essential to focus on risk and position yourself that your risk is limited or minimal in comparison to the upside. If you can lose it all, but you can make 10 times if something happens, then that's a good positive asymmetric risk reward situation. But if you can lose it all and you can just make double, then it's not a good situation to invest. Let's check how this risk reward asymmetric thing applies to the current market. Now let's say current SAP 500 price earnings ratio is 25. Earnings will grow alongside the economy which is expected to grow at 2%, 3% per year for the long term. Does the current earnings yield is 4%. If we attach a growth on that of 2%, 3% per year, don't be fooled by the current growth in earnings in the last 10 years are flat. So leave that to temporary movements. So we have a situation where we have potential gain is 5% per year, while the potential loss if a recession comes in the next 3, 4, 5 years is at least 50%. So the maximum loss let's say is 50, the potential price increase is 44. This is a negative asymmetrical risk situation coming from stocks. A similar situation is with bonds, especially with interest rates so low. So let's look at a 30 year treasury constant maturity rate yield. You can see how the yield went from 2.2% to almost 3%. Now that's nothing. That's not a higher return. You shouldn't be happy. And let's see what happened to the 20 year plus treasury ETF. It fell 15%. So if yields go up more significantly then this ETF, all bonds 20 plus 30 years will fall even more. That's what's the situation in bonds. We have a 3% yield, that's a fixed one and we have downside 15, 20, 25, 30% if those yields increase. So the downside won't be covered by the yields. So that's a very negative asymmetrical risk reward situation. I wouldn't invest in that. So as you start looking at risk reward, you will start finding asymmetrical risk reward situations and then you invest. And that's what this channel is all about. Minimizing risks for maximizing rewards. So if you're interested in something like that, be sure to subscribe as we constantly analyze the market's stocks in order to find the best asymmetric positive risk reward situations. Please leave your comments in the comments section below. I'll be happy to answer any questions. Don't forget to subscribe as I said and I'll see you in the next video.